- Introduction
- Objectives of the Auditing Standard
- Role of International Auditing and Assurance Standards Board
- Role of Auditing and Assurance Standard Board
- Classification of the SAs
- Conclusion
Introduction
As we know that checking and verification of financial information by an authorized auditor is known as auditing which assures the reliability and authenticity of the financial information to give assurance to the stakeholders of the entity. There are some specified guidelines that an auditor has to follow for conducting an audit of high quality and ensuring that financial information is free from material misstatement. These guidelines are provided by AASB i.e. Auditing and Assurance Standard Board which are acceptable all over the world. An auditor or auditing firm must follow the specified set of standards that are applicable to the applicability of their business entities.
Objectives of the Auditing Standard
The reason behind conducting the audit in an organization is to give assurance to the stakeholders that the financial information is free from material misstatement, so with the help of auditing standards, the audit can be conducted smoothly and efficiently within the time period. Auditing Standards work as guidance and ensure that all the audit procedures comply with the requirements of the applicable standard. Under the guidance of auditing standards, the auditor provides high-quality audit reports of the entity which are useful for the users of the financial statements eventually.
Role of International Auditing and Assurance Standards Board
The International Federation of Accountants was officially established in 1977 with the objective of encouraging oneness and harmony in the accounting profession at the international level. The IFAC board has set up the International Auditing and Assurance Standard Board (IAASB) for issuing a high-quality set of rules and standards for better serving in public interest at the international level.
Role of Auditing and Assurance Standard Board
As an IFAC member, The Institute of Chartered Accountants of India viz ICAI is dedicated to assisting in the implementation of its regulations. The AASB was established by the ICAI to evaluate auditing procedures and formulate auditing standards.
Classification of the SAs
On the basis of type of assurance by the engagement undertaken by the auditor, auditing standards are reclassified as follows:
SAs: These are applied in the audit of historical financial information.
SREs: These are applied in the review of historical financial information.
SAEs: These are applied in assurance engagements that deal with those subject matters other than historical financial information.
SRSs: These are applied in those engagements for information and other related services, such as compilation engagements, when procedures have been agreed upon.
Structure of the standard under the new revised preface:
- Standard for Quality control (SQC 01-99)
- Standard on Review Engagements (SRE 2000-2699)
- Standard on Assurance Engagements (SAE 3000- 3699)
- Standard on Related Services (SRS 4000- 4699)
Standards on Auditing (SA 100-999) aspects covered in series:
- Introductory Matters (SA 100-199)
- General Principles and Responsibilities (SA 200-299)
- Risk Assessment and Response to Assessed Risk (SA 300-499)
- Audit Evidence (SA 500-599)
- Using the work of others (SA 600-699)
- Audit conclusions and reporting (SA 700-799)
- Specialised Areas (SA 800-899)
The List of Auditing Standards is as follows
SA No. | Name of Standard on Auditing | Coverage Under the SAs |
SA 200 | The overall objectives of an Independent Auditor | This standard covers the auditor’s overall objectives and the audit’s conduct in accordance with the standard of auditing. |
SA 210 | Agreeing with the Terms of Audit Engagements | This standard covers the auditor’s responsibilities in agreeing to the terms of the audit engagement with management and TCWG i.e. those charged with Governance. |
SA 220 | Quality Control for an Audit of Financial Statements | This standard covers the specific responsibilities of the auditor related to quality control procedures for an audit of financial statements. |
SA 230 | Audit Documentation | It covers the auditor’s responsibilities in the preparation of audit documentation while conducting the audit. |
SA 240 | The Auditor’s responsibilities relating to Fraud in an audit of financial statements | It covers the auditor’s responsibilities towards fraud in the audit of an entity. |
SA 250 | Consideration of Laws and Regulations in an Audit of Financial Statements | It covers the auditor’s responsibilities to consider laws and regulations when performing an audit of financial statements. |
SA 260 | Communication with those charged with Governance | It deals with the auditor’s responsibilities to communicate with those charged with governance in an audit of financial statements. |
SA 265 | Communicating deficiencies in Internal Control to those charged with Governance and Management. | It deals with the auditor’s responsibility to communicate appropriately the deficiencies in internal control to those charged with governance and management. |
SA 299 | Responsibility of Joint Auditors | This SA describes the principles for the effective conduct of joint audits to achieve the overall objectives of the audit. |
SA 300 | Planning an Audit of Financial Statements | SA 300 covers the auditor’s responsibilities towards planning for an audit of financial statements. |
SA 315 | Identifying and Assessing the Risk of Material Misstatement through Understanding the Entity and its Environment | It covers the auditor’s responsibility to identify and assess the risk of material misstatement in the financial statements. |
SA 320 | Materiality in Planning and Performing an Audit | It covers the auditor’s responsibility to apply the concept of materiality in planning and performing an audit of financial statements. |
SA 330 | The Auditor’s Response to Assessed Risks | This covers the auditor’s responsibility to design and implement responses to the assessed risk of material misstatement identified. |
SA 402 | Audit Considerations Relating to an Entity Using a Service Organization | It covers the responsibility of the auditor to obtain sufficient and appropriate audit evidence when an entity uses a service organization. |
SA 450 | Evaluation of Misstatements Identified during the Audit | This SA covers requirements to evaluate the effects of identified misstatements on the audit. |
SA 500 | Audit Evidence | This SA describes the auditor’s responsibility to design and perform audit procedures to obtain sufficient and appropriate audit evidence to draw reasonable conclusions. |
SA 501 | Audit Evidence- Specific Considerations for Selected Items | This SA covers the specific considerations undertaken by the auditor in obtaining sufficient and appropriate audit evidence for selected items. |
SA 505 | External Confirmations | It deals with the auditor’s use of external confirmation methods to acquire audit evidence. |
SA 510 | Initial Audit Engagements Opening Balances | This SA covers auditor’s responsibilities relating to opening balance when conducting an initial audit engagement. |
SA 520 | Analytical Procedures | This SA covers the auditor’s use of analytical procedures. |
SA 530 | Audit Sampling | This SA describes the application of audit procedures to provide a reasonable basis for the auditor to draw conclusions from the audit sampling. |
SA 540 | Auditing Accounting Estimates, including Fair Value Accounting Estimates, and Related Disclosures | This SA covers the auditor’s responsibilities regarding accounting estimates etc. |
SA 550 | Related Parties | This SA covers the auditor’s responsibilities related to related parties while conducting the audit of any entity. |
SA 560 | Subsequent Events | It describes the fundamental principles of audit to be followed by auditors in their audit engagements. |
SA 570 | Going Concern | This SA covers the auditor’s responsibilities in the audit of financial statements relating to going concern. |
SA 580 | Written Representations | This SA describes the auditor’s responsibility to obtain written representations from the management. |
SA 600 | Using the work of Another Auditor | It covers the principal auditor’s responsibilities in relation to the use of the work of other auditors. |
SA 610 | Using the Work of Internal Auditors | It covers the responsibilities of the external auditors in relation to using the work of Internal Auditors. |
SA 620 | Using the Work of An Auditor’s Expert | It covers the auditor’s responsibilities relating to using the work of others which helps to obtain the audit evidence. |
SA 700 | Forming an Opinion and Reporting on Financial Statements | It covers the auditor’s responsibilities in forming an opinion on financial statements. |
SA 701 | Communicating Key Audit Matters in the Independent Auditor’s report | It covers the auditor’s responsibilities to communicate the key audit matters in the audit report. |
SA 705 | Modifications to the Opinion in the Independent Auditor’s Report | It covers the auditor’s responsibility to issue an appropriate report in the circumstances if modification is required. |
SA 706 | Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report | This SA deals with additional communication in the auditor’s report when it’s necessary to be considered by the auditor. |
SA 710 | Comparative Information Corresponding Figures and Comparative Financial Statements | It deals with the responsibilities of an auditor with respect to comparative information in the audit of the financial statement. |
SA 720 | The Auditor’s Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements | It deals with the auditor’s responsibilities relating to other information, whether financial or non-financial information included in an annual report of an entity. |
SA 800 | Special Considerations- Audit of Financial Statements Prepared in Accordance with Special Purpose Frameworks | This SA specify the special consideration in the applications of those SAs to an audit of financial statements prepared in accordance with a special purpose. |
SA 805 | Special Considerations- Audit of Single Financial Statements and Specific Elements, Accounts, or Items of Financial Statements | This SA describes the special considerations in the application of those SAs to an audit of a single financial statement or of a specific element for e.g. A schedule of net tangible assets. |
SA 810 | Engagements to report on Summary Financial Statements | This SA covers the auditor’s responsibilities when undertaking an engagement to report on summary financial statements. |
Conclusion
SAs are like the yardstick against which the quality of the audit results is evaluated. Sometimes for small practitioners which have less complex entities, it’s a quite difficult task due to compliance with many standards of auditing. For this, ICAI has published circulars as implementation guides so better implementation of SAs. Furthermore, there is a drastic increase in the number of frauds, which ultimately affects the trustworthiness of chartered accountants.
As per SA 200, the auditor cannot obtain absolute assurance because of inherent limitations of the auditing, but the auditor can defend his audit opinion with proper compliance with standards on auditing as well as proper audit documentation while conducting the audit.
Anuradha Tiwari
CA Aspirant
Fields of Interest: Audit and Assurance, Indirect Taxation